(b) Pursuant to section 602(d)(13) of the Federal Property and Administrative Services Act of 1949, as amended, the 10 and 6 per centum cost and fee restrictions on contracts for architect-engineer services are not applicable.

$9-3.405-50 Cost-plus-award-fee (CPAF) contract.

(a) Description. The CPAF contract is a cost-reimbursement type contract with special fee provisions. It provides a means of applying incentives in contracts which are not susceptible to finite measurements of performance essential to structured incentive contracts. The fee established in a CPAF contract consists of two parts: (1) a fixed amount (base fee) which does not vary with performance and which could be zero or negative, and (2) an award amount (award fee), in addition to the fixed amount, sufficient to encourage attainment of excellent contract performance in stated areas such as quality, timeliness, ingenuity, and cost effectiveness. Award fee may be earned by the contractor in whole or in part. The amount of award fee to be paid is determined after a subjective evaluation by the Government of the contractor's performance, judged against performance criteria established by the Government and furnished in writing to the contractor.

The number and kinds of performance goals and performance evaluation criteria used will differ widely from one contract to another. Therefore, when determining performance goals, criteria and rating plans, the contracting activity should select the plan which will motivate the contractor in a positive way to improve performance in specific areas. Evaluation reports will be prepared by the Government and results should be communicated to the contractor for comment on the evaluation findings. Additionally, the contractor may be asked to provide an assessment of its performance in relation to each performance evaluation criterion. The decision that all or part of the award fee has been earned is a unilateral determination made by a fee determination official not subject to the Disputes clause of the contract. The cost-plus-award-fee contract is suitable

(b) Application. for use when:

(1) A cost-reimbursement type contract is found necessary; (2) The work to be performed is such that specific quantitive

or objective measurement is not feasible;

(3) The achievement of procurement objectives will be enhanced by the use of a contract that effectively motivates the contractor toward exceptional performance, and permits ERDA the flexibility to evaluate both actual performance levels and the conditions under which such levels were achieved; and

(4) Any additional administrative effort and cost required to monitor and evaluate performance, as well as added fees available for award, are justified by the benefits expected.

(c) Consideration of concept.

(1) The opportunity to earn increased fees, the clear statement of goals, objectives, and performance evaluation criteria and the improved communication between and among ERDA personnel and the contractor, are designed to encourage the contractor to perform the required work effectively, to control costs, and to improve the timeliness and quality of performance. Base fees generally are negotiated commensurate with minimum acceptable performance, taking into consideration the various profit evaluation factors under 9-3.808-2. The base fee should be set at a minimum in order to provide a large award fee pool, thereby providing the contractor maximum incentive to improve performance. The award fee potential should be large enough to reward the contractor at any level of performance above minimum acceptable. In this regard, the award of additional fee for performance exceeding minimum acceptable performance in evaluated areas should be contingent upon the maintenance of at least minimum acceptable levels in all other areas of contract performance.

(2) Although award fee determinations are unilateral ones based upon judgmental evaluations, quantifying devices such as adjective ratings, point systems, or percentages of achievements may be used. Where used, these devices are for the sole purpose of quantifying the facts considered, and the amount of award fee earned shall not be merely the result of the application of summing, averaging, or a mathmatical formula.

(3) For operating, onsite service, architect-engineer and construction contracts which are subject to the maximum allowable CPFF fees set forth in the interim Procurement Handbook, Establishing and Negotiating Fee and Profit, dated March 1976, the base fee should normally not exceed 50 percent of the maximum allowable CPFF fee. The base fee plus the award fee should normally not exceed the maximum allowable CPFF fee by more than 50 percent.

(4) For contracts performed in commercial facilities, where the weighted guidelines (WGL) of §9-3.808-50 can be used to establish a reasonable fee for acceptable performance level, the base fee should normally not exceed 50 percent of the fee developed using the WGL. The base fee plus the award fee should normally not exceed the WGL developed fee by more than 50 percent.

(5) Prior approval of the senior procurement official, Headquarters, is required for total fees exceeding: the guidelines

in (3) and (4); 15 percent of estimated costs, exclusive of fees, in contracts for experimental, developmental, or research work; or 10 percent of estimated costs, exclusive of fees, in other contracts.

(d) Payment of fees. Base fees may be paid periodically as provided for in the contract. Award fees will be paid only after the amount of the award fee earned has been established. Payments of award fees earned will be made promptly after the award decision has been made in each evaluation period.

(e) Limitations.

(1) The cost-plus-award-fee contract shall not be used (i) in procurements in which all factors to be considered in the award fee arrangement (e.g., cost, delivery, performance) can be measured objectively in terms of predetermined incentive targets, or (ii) where the contract amount, term of performance, or the benefits expected from use of the award fee arrangement are insufficient to warrant any additional administrative effort or cost that may be required.

(2)

Cost-reimbursement type contracts having award fee arrangements limited to technical performance considerations are prohibited because they may increase cost disproportionately to any benefits gained. Instead, the award fee arrangement shall include both technical performance and business management considerations tailored to the needs of the particular situation. The only exception is a situation where cost estimating reliability and other factors are such that the negotiation of a separate, predetermined incentive sharing arrangement applicable to cost performance is determined both feasible and advantageous. The resulting contract would then be identified as a cost-plus-incentive-fee award-fee combination type. The goals and evaluation criteria should be results-oriented. The award fee should be concentrated on the end product of the contract, that is, output, be it hardware, research, development, demonstration or services, together with business management considerations. ever, input criteria such as equal employment opportunity, small business programs, functional management areas, such as safety, security, etc., cannot be disregarded and may be appropriate criteria upon which to base some part of the award fee. Specific goals or objectives should be established in relation to each performance evaluation criteria against which to measure contractor performance.

(f) Evaluation.

How

(1) The contract should provide for evaluatio at stated intervals during contract performance, So that the contractor will know how its performance is rated and what areas need to be improved.

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Partial payment of award fee earned will correspond to the evaluation periods'. This will make effective the incentive which the award fee was designed create by inducing the contractor to improve poor performance or to continue excellent performance.

(2) The contractor shall be furnished the performance evaluation criteria to be used to arrive at the award fee before award of the contract. The goals and objectives should be clearly set forth.

(3) As a part of contract negotiation, the Government should obtain agreement and incorporate into the contract a provision that the Government unilaterally can change the performance evaluation criteria, goals and objectives, weights and rating plan after reasonable advance notice to the contractor. The specific number of days constituting reasonable notice should be agreed to in advance by the parties.

(g) Organization and administration.

(1) Individuals will be designated as performance monitors. They will be responsible for evaluating, in their assigned areas, the contractor's performance against the established criteria.

(2) A board will be established to evaluate the contractor's performance (based on monitor's reports, contractor's input and other information) and to recommend the amount of the award fee to the fee determination official.

(3) The fee determination official will be an individual who is organizationally above the persons who are directly involved in

performance evaluation.

(4) The contractor should be given an opportunity to present matters to the board or the fee determination official on its own behalf.

(a) A letter contract may be entered into only when:

the

(1) the urgency of the requirement necessitates that contractor be given a binding commitment so that work can commence immediately;

(2) preparation of a definitive contract in sufficient time. to meet agency requirements is not possible. The procurement file shall contain documentation to support the above determination; and

(3) prior approval is obtained from the head of the procuring activity or designee.

(b) A letter contract shall be superseded by a definitive contract at the earliest practicable date, normally within 120 days or upon failure to do so, the Government's obligation shall be limited to reimbursement of the contractor's costs incurred under the terms of the letter contract through the termination date.

(c) Any amendment to a letter contract which obligates more than 50 percent of the estimated cost of the procurement or provides for a period of effectiveness of more than 120 days, must be approved by the ERDA senior procurement official, Headquarters, or a designee.

Subpart 9-3.6 Small Purchases

$9-3.600 Scope of subpart.

The policies and procedures for the purchase of supplies and nonpersonal services from commercial sources when the appropriate amount involved in any one transaction does not exceed $10,000, shall be those prescribed in FPR Subpart 1-3.6.

$9-3.603-1 Solicitation.

Names of, and information pertaining to, small businesses and minority business enterprises furnished by bidders and Small Business Administration representatives, and obtained from Government-industry meetings and seminars, and company brochures, letters, and other data, shall be included in small purchase source lists or files, and used to insure that such firms are given opportunities to quote on ERDA's small purchases.

The manner of securing quotations and the nature and extent of documentation to be required for small purchases shall be determined by heads of procuring activites, but should be limited to a minimum consistent with the objective of reducing the cost of handling small purchases. Normally, confirmation of purchase orders issued after the material has been received should not be required unless such confirmation is requested by the supplier. Documentation can be accomplished by the purchaser and receiver endorsing the invoice.

$9-3.603-3 Agency responsibilities.

The procedures for the establishment and use by the ERDA of imprest funds are set forth in ERDA Appendix 1101, Part IV, Section A, subsection 99.